Hong Kong Exchanges and Clearing (HKEX) announced that its clearing subsidiary, OTC Clear, will allow offshore investors to use China Government Bonds and Policy Bank Bonds held through Bond Connect as collateral for Northbound Swap Connect beginning 13 January 2025.
The new eligible collateral can be used to cover initial margin requirements of Northbound Swap Connect, providing greater flexibility to international investors and enhancing their capital efficiency. It will also help vitalize international investors’ bond holdings in the China Interbank Bond Market, promoting the internationalization of the RMB.
Swap Connect links the Hong Kong and Mainland China interbank interest rate swap markets since its launch in May 2023. As of the end of November 2024, a total of 71 overseas institutions have participated in Northbound Swap Connect. The average daily turnover of Swap Connect totaled RMB18.2 billion ($2.5bn) in November 2024, up sharply from about RMB3 billion in May 2023.